Logistics leaders doubt budget

Fears budget pledges for transport are financially unfeasible have led to calls for more taxation and private investment

Logistics leaders doubt budget
Logistics leaders doubt budget affordability
By Sean Muir | May 16, 2012

Fears the Federal Budget’s transport promises are financially unfeasible have prompted some transport and logistics leaders to call for more taxation, and private investment incentives.

University of Sydney’s Institute of Transport and Logistics Studies (ITLS), the Australian Logistics Council (ALC), and the Australasian Railway Association (ARA), have all praised the 2013-14 budget’s proposed funding for transport infrastructure.

But another common theme among responses to the budget has been doubt in the government’s ability to afford the long list of costly infrastructure projects.

As part of the budget handed down this week, the government has committed to spend an extra $24 billion on transport infrastructure projects across the country under the second phase of its Nation Building Program.

ITLS Director David Hensher says the budget gives infrastructure more priority than any federal budget before, but says it would be unwise to rely on the funding pledges to solve the nation’s transport woes.

"I suppose my fundamental comment to share, is where is the money coming from?" Hensher says.

"In the budget deficit environment how guaranteed is this money, especially with a change of government?"

Hensher says alternative funding avenues must be taken more seriously to meet future transport infrastructure needs.

Hensher says the government’s first funding priority should be to reindex the fuel excise, which stopped being indexed for inflation in 2001.

The government partly uses fuel excise – incurred by oil refining companies and passed on to buyers – to fund national road infrastructure projects and repair roads.

"The fuel excise, which has been the major revenue raiser from this sector, is heading south, and in the next ten years there is going to be a serious shortage even to do the things we are doing today," Hensher says.

"Even the amount of money that the feds are talking about is not much in the overall scheme of infrastructure needs, and it is pretty clear to me that we have to revisit the indexation of fuel excise."

Hensher also supports major road pricing reform and better private investment incentives to reduce the government’s growing transport infrastructure burden.

"I think they should be braver by supporting some major road pricing reform," he says.

"I think we mustn’t just say let’s pick on a congestion charge –
we have to reform the whole lot, which includes rethinking registration, distance-based charging and a whole range of issues.

"We have got to also provide incentives to encourage private sector investment."

"The overriding issue is that we are going to have to be more serious about the role of non-government funding opportunities in the future, and I think despite some negative undertones from some failures of equity investment in certain toll roads in recent years the private sector is still ready to invest, but they need a much better appreciation of the risk."

ALC Managing Director Michael Kilgariff mirrored Hensher’s enthusiasm for strong infrastructure focus, but also questioned how and when many of the major freight logistics projects would be delivered and funded.

"The government’s intention to boost infrastructure spending under Nation Building 2 is welcome, but we also note a number of major projects are contingent on partnership arrangements with the states and also on coming to commercial agreements with the private sector," Kilgariff says.

"Nation Building 2 will be critical to meeting our future freight challenges, and so ALC looks forward to future governments taking this program forward and ensuring the proposed projects are delivered in a timely fashion to improve supply chain efficiency.

"This will depend in part on the government putting in place appropriate taxation measures to encourage greater private sector investment in freight infrastructure.

"We therefore encourage the work of the Infrastructure Finance Working Group to continue so governments can leverage much needed private capital in freight logistics infrastructure."

ARA CEO Bryan Nye also praised ‘substantial and long-awaited’ pledges for rail infrastructure and the nation’s freight network.

A highlight for Nye was the Brisbane Cross River Rail’s proposed funding, which he says represents the most significant step forward in the project to date.

"With Brisbane’s inner city rail network reaching its absolute capacity within the next five years, this priority-ranked project is the only medium-to-long-term solution available that will ensure Brisbane’s entire transport network doesn’t grind to a halt within the decade," Nye says.

The project is expected to reduce road congestion, which will benefit road freight movement.

"However, with the $715 million on the table for Cross River Rail being conditional on both a matching contribution from the Queensland Government and significant private sector investment, the project isn’t across the line just yet," Nye says.

Regarding rail freight, Nye says funding for the Advanced Train Maintenance System (ATMS) will allow significant technological advancement, which will extract greater efficiencies and increase productivity on the interstate rail network.

He was also pleased the Inland Rail remained on the agenda.

He says the project will take up to seven hours off a Brisbane to Melbourne journey, and move freight from trucks to rail.

"The new funding towards ATMS, as well as upgrades to rail infrastructure to Port Botany and the ongoing work at the Moorebank Intermodal Terminal will create broader economic advantages that benefit everyone," Nye adds.

But not all industry groups had good things to say about the budget.

Freight and Trade Alliance (FTA) Director Paul Zalai says the import supply chain will feel the sting of an Import Processing Charge (IPC) restructure to recover the costs of all import related cargo and trade functions undertaken by the Australian Customs and Border Protection Service.

Zalai described the magnitude of the IPC increase as "staggering".

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